Pricing, infrastructure hold key to oil growth

In 2009-10, India’s oil and gas production is projected to increase significantly — oil by 9.5 per cent and gas by 53 per cent over the previous year.

Oil production has risen after the commencement of crude oil production from Rajasthan, KG offshore and improved oil recovery projects by national oil companies. However, gas production has gone up because of the commercialisation of a large gas discovery in KG offshore and coal bed methane projects.

This year has been a landmark year for the additional production of oil and gas in India. This increase in production will help reduce the country’s dependence on imported oil, which will result in savings of foreign exchange, overcoming the gas supply deficit in industries and establishing greenfield gas-based projects. This will lead to higher economic development and an increase in GDP growth.

To optimise the utilisation of natural gas in the country, the government is planning to promote the development of a nationwide gas grid on the pattern of national highways. This will help connect various sources of natural gas to different demand centres all over the country. The laying of a natural gas pipeline network will help in the growth of gas-based industries, which, in turn, will spur economic development.

Further, the Petroleum and Natural Gas Regulatory Board has identified over 300 cities for city gas distribution projects. The common man will stand to gain substantially from the expansion of city gas networks because of the proposed provision of piped natural gas to households and compressed natural gas for vehicles at a reduced cost. The enhanced availability of PNG/CNG will, in turn, help in improving public health and the quality of life by ensuring a cleaner environment.

To enhance the availability of right quality and quantity of petroleum products, the government-approved Vision 2015 in June 2009 aimed at expanding the marketing network as well as the quality of the products and services, especially in the rural areas.

National oil marketing companies have launched a six-digit toll-free complaint number. A facility to book LPG through SMS and get timely information about delivery status were also launched in August. To contain the menace of adulteration, state-owned oil marketers have started automated retail outlets through advanced information and technology solutions such as monitoring the movement of tank trucks through global positioning system and third party certification of retail outlets.

A dedicated scheme called Rajiv Gandhi Gramin LPG Vitrak Yojna was launched in October 2009 with a view to increasing the reach of LPG in the rural areas. This will help the rural population gain access to clean cooking fuel. Vision 2015 envisages the increase in population coverage of LPG access to 75 per cent from 50 per cent of the population.

As part of its community welfare measures, the government has enhanced the corporate social responsibility (CSR) funds of the oil PSUs to at least 2 per cent of net profit of the previous year for community development or welfare. The CSR activities include education, health and medical care, providing clean drinking water besides rising to the occasion in times of national calamities.

Key challenges

The Indian oil and gas sector faces challenges in enhancing production, meeting increasing demand, providing petroleum products at affordable prices, enabling the creation of a level-playing field to both public and private players, bringing in a transparent and fair regulatory mechanism and meeting investment requirements towards pipelines, CGD networks and the modernisation of old refineries.

Budget expectations

The development of the oil and gas sector leads to energy security, employment and welfare of the community. Accordingly, it is expected that the government will promote sectoral development through a transparent and market determined pricing mechanism, incentivising investments and providing tax holidays in establishing new infrastructure such as pipelines and LNG terminals, oil and gas production and simplifying the tax regime for service providers.

Source: The Telegraph

__________________________________________________________________________________